Apple Car - Is it going to be a reality?
Remasankar Sivasankaran Nair
Vice President & Advisor - Global Client Engagement
Apple’s Autonomous Electric Car - Project Titan
Apple originally planned to have an autonomous electric car with no steering wheel or pedals that would operate on its own. "Apple Car" that would detect its driver via fingerprint
In 2014, Apple began working on "Project Titan," with more than 1,000 car experts and engineers developing an electric vehicle with limited self-driving capabilities.
“We’re focusing on autonomous systems,” Tim Cook, CEO, Apple told?Bloomberg. “Clearly one purpose of autonomous systems is self-driving cars. There are others. We sort of see it as the mother of all AI projects.”
On 27 February 2024 Bloomberg reported that Apple?is canceling a decade long effort to build an electric car. The project will begin winding down and the employees on the car team — known as the Special Projects Group, will be shifted to the artificial intelligence division under executive?John Giannandrea.
According to New York Times The car project, is estimated to have cost Apple $10 billion.
Technologies used for?CarPlay?and?Car Key?will continue to roll out as a result of the continued development and testing. The company will probably turn its automotive patents and technology into a money-making machine.
Apple announced BMW as its first partner to implement Car Key. The partnership is due to the companies' shared relationship with the Car Connectivity Consortium (CCC).
Apple to focus more on AI?
In 2023, Apple?released a development framework?called MLX that lets developers easily build machine learning (ML) models optimized for Apple Silicon, its line of Macbook processors. Apple purchased 32 AI startups throughout 2023.
Apple is also now working on?its own generative AI model?called “Ajax,” its version of OpenAI’s GPT-n series.
Further Apple showcases a commitment to AI through various products and services, integrating it into areas like facial recognition and speech synthesis. With the launch of Apple Vision Pro in February 2024, the company aims to lead in emerging technologies, such as AI-powered augmented and virtual reality
In March Apple?has acquired Canadian artificial intelligence startup DarwinAI, adding technology to its arsenal ahead of a big push into generative AI in 2024?
Can Apple contribute more to sustainability?
As per Apple the sustainability goal is to make all the products carbon neutral by 2030
According to Apple Environmental progress report, https://www.apple.com/environment/pdf/Apple_Environmental_Progress_Report_2023.pdf
Goal: “Transition our entire product value chain, including manufacturing and product use, to 100 percent clean electricity by 2030”.
“As of March 2023, over 250 suppliers have committed to transitioning to 100 percent renewable electricity for their Apple production, with over 85 percent of Apple's direct spend for materials, manufacturing, and assembly of our products worldwide included in those commitments.”
Apple is transitioning to greener shipping methods, such as ocean transport, to decrease carbon emissions from its manufacturers to customers. In 2022, Mac Studio, Studio Display, and AirPods (3rd generation) were introduced, employing ocean shipping for their supply chain. On average, ocean transport reduces emissions by 95% compared to air shipping. Furthermore, Apple is exploring innovative transport solutions, such as alternative fuels and electric vehicles. For example, a hydrogen-fueled heavy-duty truck was piloted in Europe, and Apple is considering carriers offering carbon-neutral deliveries with electric vehicles, including e-bikes and e-cars.
However, given the increasing focus on sustainability, Apple may face challenges in maintaining relevance and competitiveness without involvement in the EV segment.
Apple’s Growth
Apple is a 2-5% revenue growth business now. In the period ending December 30, 2023, it achieved $119.6 billion in revenue, up 2% compared to the prior year. Earnings per diluted share were $2.18, marking a 16% increase year over year. However, Apple's revenue for the 12 months ending December 30, 2023, was?$385.71 billion, which is a 0.47% decrease from the previous year
Quarterly view of Apple’s Revenue
Apples sales in China in the December quarter fell nearly 13% and fell 24% year-on-year in the first six weeks of 2024, according to research firm Counterpoint, as the U.S. company faced increased competition from domestic rivals such as Huawei
Samsung and Google have released handsets with new generative artificial intelligence capabilities, leading to expectations that Apple will soon respond with similar features on its own devices to prompt consumers to upgrade and stay in its ecosystem.
Apple became the first US company to be valued at over $3tn in Jan 2022. But in Jan 2024 It was overtaken by Microsoft as the world’s most valuable company, as its market cap slipped below $3tn. Current market cap of Apple is $2.671 Trillion. Nvidia?is nipping at the heels of Apple?to become the world's second-most-valuable company
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Why should Apple continue its hunt for EV Market?
If Apple were to get even 10% of the automotive market, it would result in a 60% increase in top-line revenue.?
The global electric vehicle market size reached USD 255.54 billion in 2023 and is projected to hit around USD 2,108 billion by 2033 with a notable CAGR of 23.42% from 2024 to 2033.?Electric vehicle sales have increased from 67,68,000 in 2021 to 1,05,22,000 in 2022.
Between 2022 and 2028, the size of the global electric vehicle market is expected to increase from 538.8 billion U.S. dollars to reach an estimated global market size of some 906.7 billion U.S. dollars by 2028
Will Apple ?acquire Rivian: The emerging EV player?
Rivian Automotive, Inc. is an automotive EV manufacturer based in?Irvine, California,, The Company’s R1 platform offers the first-generation consumer vehicles: the R1T, a two-row five-passenger pickup truck, and the R1S, a three-row seven-passenger sport utility vehicle (SUV)
Rivian Automotive unveiled three new vehicles (R2, R3, R3X) and announced more than $2 billion in savings related to pausing construction on a plant in Georgia. The R2 is expected to start at about $45,000 when it goes on sale during the first half of 2026.
Amazon Inc. (AMZN) is currently Rivian's largest shareholder and ?ordered 100,000 custom electric delivery vehicles from Rivian. But in Nov 2023, the EV maker ended its exclusive deal to provide Amazon with electric vans. The selloff in Rivian's shares late last month was felt by Amazon, which saw a roughly $1 billion loss in its Rivian investment.
AT&T is the first Rivian partner outside of Amazon to agree to buy its commercial vans
Interestingly, two senior members of the Apple Car team departed this year to join Rivian. DJ Novotney vice president of Engineering left to become senior vice president of Vehicle programs at Rivian. Jonas Reinke, Head of product, mobility & automotive services also joined Rivian as vice president of product management in January
Apple and Rivian are both in need of growth.
One aspect of the situation involves Apple, a company facing challenges in its flagship consumer electronics division. Despite the positive growth of Apple's Services sector, it hasn't compensated adequately for the decline in hardware sales. Consequently, Apple is actively seeking new avenues for growth
On the flip side, Rivian emerges as a contrasting figure. In 2023, the company rolled out 57,232 vehicles, marking a staggering 135% surge compared to the previous year. However, during its fourth-quarter earnings call, Rivian's management surprised investors by forecasting nearly stagnant production levels for 2024
Apple has invested numerous years and billions of dollars into developing its Apple Car over the past decade. Now, with Rivian boasting a market capitalization of approximately $12 billion, Apple could potentially acquire it for the same amount. The primary benefit Apple would gain from purchasing Rivian lies in the integration of Apple software into Rivian vehicles. However, this integration could conceivably occur without Apple acquiring Rivian. If Apple does proceed with the acquisition, it stands to gain potential growth opportunities and potentially greater control over software customization. Nonetheless, Rivian currently lacks the extensive real-world data range necessary to significantly impact the autonomous driving landscape, limiting its capabilities to driver assistance software mainly on highways, a strategy adopted by many other automakers, with Tesla being a notable exception. Tesla's competitive edge lies in its expertise in manufacturing and artificial intelligence (AI), which necessitates substantial investment and the accumulation of vast amounts of real-world data, ultimately amounting to trillions of miles. An acquisition by Apple could offer a solution for bridging this gap
Apple currently has more than $73 billion of cash and equivalents on its balance sheet. It is clear that Apple could acquire Rivian in an all-cash deal at a pretty generous premium, and still have plenty of change left over.
But a closer look at Apple's history with regard to making acquisitions puts the possibility of such a hypothetical deal becoming reality in a different light.
Apple's largest purchase ever was its $3 billion deal for headphone company Beats Electronics in 2014. Across its 10 largest acquisitions, Apple has spent roughly $7.4 billion.
Those data points make one thing clear: Apple rarely pursues big-ticket acquisitions.
Conclusion
Apple’s Car vision originally was to have a vehicle with no steering wheel or pedals that would operate on its own. "Apple Car" that would detect its driver via fingerprint v/s market cap and revenue growth. Apple is a technology company, so it has zero resources and know-how in the automotive space. Apple is desperately in need of additional growth drivers. If Apple were to get even 10% of the automotive market, it would result in a 60% increase in top-line revenue. Also this will enable Apple to play a significant role in sustainability. Even though lot of speculations are ongoing, Apple has maintained its characteristic secrecy about its automotive ambitions. It's still unclear whether Apple intends to manufacture its own autonomous car or focus on developing autonomous driving software to partner with existing car manufacturers. Acquiring the best in class innovative EV company, enhance the software and AI to make it a dream car can be a lucrative option for a sustainable revenue growth. Rivian can be one option but may be other players can also be in the radar of evaluation.
?Article by Remasankar
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Any factual errors (accompanied by verifiable proof of the inaccuracies) found with the content in this article will be promptly updated upon request.
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Exciting prospects! How do you anticipate Apple's entry shaping the future of autonomous vehicles, Remasankar S?